US cotton exports rise on China demand: USDA report

• January 22, 2021

China's cotton import this season is expected to reach the highest level in seven years. Moreover, China’s consumption is expected to recover 5.5 million bales from the previous year and reach 38.5 million bales, accounting for more than one-third of world use in 2020-21, the Foreign Agricultural Service of the US department of agriculture (USDA) said in its January 2021 report on 'Cotton: World Markets and Trade'.

The demand for US cotton in China has been mostly led by the State Reserve and State-owned Enterprises (SOEs), which have likely accounted for more than three-fourths of total imports of US cotton thus far in 2020-21. "Instead of sourcing from Brazil, the primary supplier in the previous two marketing years, the State Reserve and the SOEs have returned to the United States likely in part spurred by the Phase One Agreement," the report said.

Despite higher US prices relative to Brazil and India (second and-third-largest exporters forecast in 2020-21), US sales and shipments to China through December exceeded the previous year by more than 2.3 million bales. These export volumes are notable considering higher exportable supplies for Brazil and India, where both countries have record carrying and Brazil’s 2020-21 exports are forecast at a record, the report added.

Australia, another significant supplier to China, witnessed exportable supplies decimated by a 2020 drought. Like the United States, Australia is a significant supplier of high-quality cotton to the world’s largest importer. "In addition, a recent political dispute between it and China has diminished demand for Australian origin and boosted imports of US cotton," the USDA report said.

As a result of resilient China demand, US cotton exports are forecast to be mostly unchanged from the previous year, despite fewer shipments and sales to Vietnam and Bangladesh.